Answer the Following Questions Using the Information Below

question 75

Multiple Choice

Answer the following questions using the information below:
Weather Inc., manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $190 per air conditioner, consisting of 75% variable costs and 25% fixed costs. The company has surplus capacity available. It is Weather Inc.'s policy to add a 30% markup to full costs.
-A medium sized motel chain is currently expanding and has decided to create more rooms and air condition all of its rooms,which are currently not air conditioned.Weather Inc.is invited to submit a bid to the motel chain.What per unit price will Weather Inc.most likely bid for this special order of 200 units? Assume that the price is being fixed for a long-term commitment.

• A) $190.00 per unit
• B) $142.50 per unit
• C) $247.00 per unit
• D) $230.00 per unit

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Definitions:

Price Effect

The change in the quantity demanded of a good or service caused by a change in its price.

Deadweight Loss

The loss of economic efficiency that occurs when the equitable market outcome is not achieved, often due to taxes, subsidies, or artificially imposed prices like price ceilings or floors.

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information that leads to firms being price takers.

Short-Run Supply Curve

A graphical representation showing the quantity of goods a firm is willing and able to supply at different prices in a given short-term period, holding some factors constant.